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Assessing Roblox in the Long-Term
Looking beyond bookings and profitability
Roblox continues to evolve and grow as a platform. In its most recent shareholder letter Roblox stated that its July DAUs totaled 58.5 million (an all-time high); Bookings in were $243-$247 million (up 8%-10% year over year); and Revenue was $205-$208 million (up 25%-27% year over year).
When assessing the long-term prospects of the platform with my hat on as the CEO of Supersocial, I’m looking at five pillars:
Content & Experiences
Daily Active Users
Let’s dig in.
1) Developer Ecosystem
The developer community on Roblox is one of the most passionate, talented and dedicated in the industry. Roblox, the company, single handedly raised a new generation of developers and creators who are committed to its platform, but also served as a community in which these developers and creators make friends, with whom they build games, and make a living. One of the unsung success factors and competitive advantages of Roblox is its developer community. The surprising thing to me is how underestimated it is a success pillar by the investor community and the industry as a whole. Alongside the growth of its native developer community (aka “Robloxians”), the platform is gradually attracting indie developers and professional studios who recognize the platform’s potential, both economically and as a version of what the metaverse could look like in the future.
2) Content & Experiences
There are millions of games and experiences on the platform. That long tail of content provides many reasons for users to engage, connect and play. There’s an experience for everyone on the platform in multiple genres. Alongside the core category of experiences that has been the foundation of the platform for many years (i.e. games build by its players who became developers), a relatively new category of experiences has emerged in the past 12 months - brand experiences, which is growing fast. With the metaverse emerging as the next frontier for human experiences on the Internet, brands, IP owners and enterprises are rapidly embracing a new generation of social platforms, with Roblox as one of the main ones. There are several sectors that are naturally positioned to enter the Roblox ecosystem with branded experiences and where I’m seeing strong momentum: (1) Fashion & Beauty, (2) Entertainment IP, (3) Sports, (4) Music, and (5) CPG. With 3D avatars becoming ver more important in how people express themselves, consumer brands that amplify personal expression will continue to play a dominant role on the platform.
3) Aged-Up Users
According to Roblox, the fastest growing age group on the platform is 17-24. Roblox also stated recently that for the first time in the platform’s history, the 17-24 age group is equal in size to the 9-12 age group, which historically has been the core platform’s demographics. That is a significant trend which fits well to Roblox strategic priority of aging up the platform (both attracting and retaining users above 13). Being able to consistently attract and retain the older demographics is a key success factor for Roblox in growing its platform and reaching 1 billion monthly users (current estimates suggest the platform has more than 300 million monthly users although no official data has been provided by Roblox). Among others aspects that will help to deliver on this priority are the first two pillars outlined above: (1) continued growth of the developer community (nurturing, attracting and retaining developers and studios); and (2) introducing more and more “aged-up” content and experiences (and hence the important role of brand experiences).
4) Daily Active Users
July 2022 DAUs totaled 58.5 million, an all-time high, and up 26% YoY. This is encouraging. It’s essential that Roblox continues to grow, diversify and retain its user base. Rising DAUs lifts all boats. The momentum of user growth is especially important in the aftermath of of Covid-19. While the pandemic is still here, most people in most countries have gone back to some form of normality. That includes young people who are the main audience (currently) of the Roblox platform. Which is why it encouraging to see that July’s user numbers which are at all-times high. The caveat is that we’re at summertime and it remains to be seen if the DAUs growth continues in the coming months once young people are back to school. Should also be noted that Roblox’s DAUs essentially doubled since 2019.
5) Geographic Breakdown
Roblox now has users in 200 countries. Roughly 66% of DAUs come from non-North America markets which is fantastic, especially seeing that of the top 10 countries on the platform, 6 are emerging economies (Brazil, Philippines, Thailand, Mexico, Russia, Turkey). The global appeal for Roblox is clear and the potential upside in the years to come is significant. That being said, the non-North American markets still account for roughly 33% of Roblox’s bookings. Roblox will need to see monetization of international users significantly improving in the coming years in order to balance the the high rate of penetration with users in North America.
I remain bullish on Roblox as an era defining platform and a key player in the emerging metaverse. That being said, challenges are abound, among them:
Diversifying revenue streams for developers so great businesses could be built
Attracting and retaining aged-up users (13+)
Monetizing international users
Investing in, and scaling infrastructure and developer tools
Nurturing and investing in next generation content
Enabling a much more effective discoverability (for both users and developers)
Yonatan Raz-Fridman ("Yon") is the founder and CEO of Supersocial, a metaverse company that develops, publishes and operates cutting-edge games, experience and brand worlds on Roblox and other emerging platforms. He's also the creator and host of Into The Metaverse, a leading podcast and newsletter covering the metaverse. Our mission is to become the leading destination to learn about the Metaverse